Acorn proposes zero dividend share class

The Acorn Income fund plans to issue zero dividend shares in order to cover a severed credit line from Royal Bank of Scotland.

Nigel Sidebottom
Nigel Sidebottom

The board will put proposals for a new share class to shareholders at an extraordinary general meeting, scheduled for December 15.

The proposals follow Royal Bank of Scotland’s decision to not renew £6m in borrowing faculties which expire on February 13, 2012.

“While there were may options to do this without shareholder approval, the board felt that structural changes such as these required it,” says Nigel Sidebottom, investment adviser to the fund.

The company estimates that between £12m and £13.5m will be raised through the issuance of new zero dividend redeemable preference shares which will carry a gross redemption yield of between 5.75% and 6.50%, redeemable in five years.

The proceeds will be spilt between paying off the balance of the borrowing facilities and adding to existing positions in the Smaller Companies portfolio, run by Unicorn’s John McClure.

Between 70 and 80% of the proceeds will be used to bolster existing positions in the Smaller Companies portfolio which currently comprises about 27 stocks.

If shareholder approval is secured, issuance of the new share class could be available from December 21.

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